Correlation Between Southwest Gas and Waste Management
Can any of the company-specific risk be diversified away by investing in both Southwest Gas and Waste Management at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Southwest Gas and Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Gas Holdings and Waste Management, you can compare the effects of market volatilities on Southwest Gas and Waste Management and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Southwest Gas with a short position of Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Gas and Waste Management.
Diversification Opportunities for Southwest Gas and Waste Management
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and Waste is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Southwest Gas is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Southwest Gas Holdings are associated (or correlated) with Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Southwest Gas i.e., Southwest Gas and Waste Management go up and down completely randomly.
Pair Corralation between Southwest Gas and Waste Management
Considering the 90-day investment horizon Southwest Gas Holdings is expected to generate 1.27 times more return on investment than Waste Management. However, Southwest Gas is 1.27 times more volatile than Waste Management. It trades about 0.11 of its potential returns per unit of risk. Waste Management is currently generating about 0.13 per unit of risk. If you would invest 7,124 in Southwest Gas Holdings on September 2, 2024 and sell it today you would earn a total of 692.00 from holding Southwest Gas Holdings or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Gas Holdings vs. Waste Management
Performance |
| Timeline |
| Southwest Gas Holdings |
| Waste Management |
Southwest Gas and Waste Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Gas and Waste Management
The main advantage of trading using opposite Southwest Gas and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Gas position performs unexpectedly, Waste Management can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Waste Management will offset losses from the drop in Waste Management's long position.| Southwest Gas vs. NewJersey Resources | Southwest Gas vs. Northwest Natural Gas | Southwest Gas vs. NorthWestern | Southwest Gas vs. Chesapeake Utilities |
| Waste Management vs. Waste Connections | Waste Management vs. Clean Harbors | Waste Management vs. Casella Waste Systems | Waste Management vs. Gfl Environmental Holdings |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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